X-Fan
05-16-2005, 06:55 PM
May 16 (Bloomberg) -- Forty-five Microsoft Corp. Xbox executives spent three days in February holed up at the Doubletree hotel in Bellevue, Washington, plotting a second attempt to unseat Sony Corp.'s PlayStation as the top selling video-game console.
``Things are going to be different this time around,'' said Peter Moore, head of Xbox sales and marketing. Moore helped lead the group in role-playing exercises aimed at simulating how customers and Sony executives might react to the version of Xbox that Microsoft unveiled last week.
Sony may see its share of the $6.16 billion market for video- game consoles decline to 45 percent from 57 percent currently after Microsoft releases its new machine, Piper Jaffray & Co. analyst Anthony Gikas estimates. Redmond, Washington-based Microsoft has spent $12 billion and incurred losses of more than $2.4 billion developing and selling Xbox.
PlayStation 2, which is profitable, had 966 games at the end of 2004, including games Xbox doesn't have such as ``Final Fantasy,'' and initial rights to the top-selling ``Grand Theft Auto'' series. Xbox has 582 games, according to Banc of America Securities, including the ``Halo'' series.
Both companies will present details of their new machines later today in advance of the Electronic Entertainment Expo gaming trade show in Los Angeles. Sony scheduled its press conference four hours earlier than Microsoft's.
``Xbox has gained a lot of momentum and credibility,'' said Gikas, who is based in Minneapolis. ``The technology of the first Xbox was very competitive, and maybe even a little bit superior, and they've now established themselves.''
`Competitive Advantage'
Microsoft shares rose 27 cents to $25.49 at 4 p.m. New York time in Nasdaq Stock Market trading. Sony shares dropped 1 percent to 3,960 yen on the Tokyo Stock Exchange.
Microsoft, the world's biggest software maker, wanted to avoid the mistakes of its first launch in 2001, Moore, 50, said. Microsoft's preparation this time will help it take the lead from Sony, which has dominated the market since the first PlayStation was released in 1995, he said. Analysts such as Gikas said that's unlikely to happen.
This time, Microsoft has the jump. Sony isn't scheduled to release its next PlayStation until 2006.
In 2001, the first Xbox was released in the U.S. about a year after Tokyo-based Sony's PlayStation 2 and 18 months after the debut in Japan. By the time Xbox was released, 20 million PlayStations had been shipped. Game makers then made more games for the new PlayStation and gave Sony exclusive titles, which helped propel sales.
``It is a huge competitive advantage to be first to market,'' said Jason Maynard, a San Francisco-based analyst at Credit Suisse First Boston, wrote in a note to clients.
`Steep Mountain'
Xbox's ``Halo 2'' sold 6.7 million copies, compared with more than 13 million for ``Grand Theft Auto: Vice City.''
``The advantage of going on sale a year earlier for Microsoft is not trivial, but Sony is the king,'' said Scott Steinberg, vice president at Sega Sammy Holdings Inc.'s U.S. unit in San Francisco, which this week will show two games for the new Xbox. ``It would be hard for us to see anyone dethroning them.''
``For Microsoft to believe that if they have all the right ingredients, therefore they will be able to reach the levels of penetration we have, it's a steep mountain to climb,'' Sony Computer Entertainment America spokeswoman Molly Smith said. Sony has sold more than 87 million PlayStations. Microsoft has sold 20 million consoles and Nintendo Co. has sold 18 million.
Spending time at the Doubletree hotel acting out the release and marketing scenarios and taking more time with game developers and customers are some of the extra lengths Microsoft went to in preparing to take on Sony.
Sharing Pizza
``You need to take time out and put yourself in the other's shoes,'' said Moore, who took on the guise of a Sony executive and led the ``Sony'' team though the exercises.
Moore and his boss, Robbie Bach, who runs the Xbox division, turned up at the offices of THQ Inc. in Calabasas Hills, north of Los Angeles in California, with a gym bag containing the new Xbox. Moore, Bach and the THQ officials hung out eating pizza and discussing the new machine, said Philip Holt, senior vice president of product development at THQ, maker of ``The Incredibles'' game.
``It was clear they had spent a lot of time on the road,'' Holt said. Their meeting was ``comprehensive,'' he said.
Microsoft didn't pay as much attention last time, costing them the goodwill of many games makers.
Had the ``Grand Theft Auto 3'' title been initially available on both PlayStation and Xbox, the market share gaps may have been much smaller, Credit Suisse's Maynard said.
Sony's Challenge
Microsoft's early start this time may give it better exclusive games, helping it pare Sony's lead. Sony may fall to 45 percent or 50 percent of the market with the next game systems, from 57 percent now, Piper Jaffray's Gikas said.
The challenge to Sony, the world's second-largest consumer electronics maker, comes after the company posted its biggest loss in two years last quarter and in March installed Howard Stringer as chief executive officer. The stock has lost more than 66 percent of its value in the past five years.
Microsoft CEO Steve Ballmer is depending on Xbox to help revive sales growth, which is expected to drop to the slowest rate ever in the year ended June 30.
This time, Microsoft will also spend more time appealing to the Japanese market, the No. 2 video-game market and Sony's home turf. The first Xbox didn't have titles tailored to the local audience and the machine and controllers were too big to appeal to Japanese gamers.
`Battle-Hardened'
Since the release of Xbox, Microsoft has built a reputation for its graphics and technology. Xbox outsold PlayStation 2 in the U.S. holiday shopping season for the first time last year, helped by ``Halo 2.''
Microsoft will lure better games from top publishers this time, Microsoft's Moore said. The company will spread its best titles evenly over each year, slimmed down the console and contracted with three well-known Japanese game developers, including the creator of ``Final Fantasy,'' to produce Xbox games.
``We've been around the block now,'' Moore said. ``We're battle-hardened. It's a whole different ball game this time.''
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Looking good guys. Looking GOOD!
``Things are going to be different this time around,'' said Peter Moore, head of Xbox sales and marketing. Moore helped lead the group in role-playing exercises aimed at simulating how customers and Sony executives might react to the version of Xbox that Microsoft unveiled last week.
Sony may see its share of the $6.16 billion market for video- game consoles decline to 45 percent from 57 percent currently after Microsoft releases its new machine, Piper Jaffray & Co. analyst Anthony Gikas estimates. Redmond, Washington-based Microsoft has spent $12 billion and incurred losses of more than $2.4 billion developing and selling Xbox.
PlayStation 2, which is profitable, had 966 games at the end of 2004, including games Xbox doesn't have such as ``Final Fantasy,'' and initial rights to the top-selling ``Grand Theft Auto'' series. Xbox has 582 games, according to Banc of America Securities, including the ``Halo'' series.
Both companies will present details of their new machines later today in advance of the Electronic Entertainment Expo gaming trade show in Los Angeles. Sony scheduled its press conference four hours earlier than Microsoft's.
``Xbox has gained a lot of momentum and credibility,'' said Gikas, who is based in Minneapolis. ``The technology of the first Xbox was very competitive, and maybe even a little bit superior, and they've now established themselves.''
`Competitive Advantage'
Microsoft shares rose 27 cents to $25.49 at 4 p.m. New York time in Nasdaq Stock Market trading. Sony shares dropped 1 percent to 3,960 yen on the Tokyo Stock Exchange.
Microsoft, the world's biggest software maker, wanted to avoid the mistakes of its first launch in 2001, Moore, 50, said. Microsoft's preparation this time will help it take the lead from Sony, which has dominated the market since the first PlayStation was released in 1995, he said. Analysts such as Gikas said that's unlikely to happen.
This time, Microsoft has the jump. Sony isn't scheduled to release its next PlayStation until 2006.
In 2001, the first Xbox was released in the U.S. about a year after Tokyo-based Sony's PlayStation 2 and 18 months after the debut in Japan. By the time Xbox was released, 20 million PlayStations had been shipped. Game makers then made more games for the new PlayStation and gave Sony exclusive titles, which helped propel sales.
``It is a huge competitive advantage to be first to market,'' said Jason Maynard, a San Francisco-based analyst at Credit Suisse First Boston, wrote in a note to clients.
`Steep Mountain'
Xbox's ``Halo 2'' sold 6.7 million copies, compared with more than 13 million for ``Grand Theft Auto: Vice City.''
``The advantage of going on sale a year earlier for Microsoft is not trivial, but Sony is the king,'' said Scott Steinberg, vice president at Sega Sammy Holdings Inc.'s U.S. unit in San Francisco, which this week will show two games for the new Xbox. ``It would be hard for us to see anyone dethroning them.''
``For Microsoft to believe that if they have all the right ingredients, therefore they will be able to reach the levels of penetration we have, it's a steep mountain to climb,'' Sony Computer Entertainment America spokeswoman Molly Smith said. Sony has sold more than 87 million PlayStations. Microsoft has sold 20 million consoles and Nintendo Co. has sold 18 million.
Spending time at the Doubletree hotel acting out the release and marketing scenarios and taking more time with game developers and customers are some of the extra lengths Microsoft went to in preparing to take on Sony.
Sharing Pizza
``You need to take time out and put yourself in the other's shoes,'' said Moore, who took on the guise of a Sony executive and led the ``Sony'' team though the exercises.
Moore and his boss, Robbie Bach, who runs the Xbox division, turned up at the offices of THQ Inc. in Calabasas Hills, north of Los Angeles in California, with a gym bag containing the new Xbox. Moore, Bach and the THQ officials hung out eating pizza and discussing the new machine, said Philip Holt, senior vice president of product development at THQ, maker of ``The Incredibles'' game.
``It was clear they had spent a lot of time on the road,'' Holt said. Their meeting was ``comprehensive,'' he said.
Microsoft didn't pay as much attention last time, costing them the goodwill of many games makers.
Had the ``Grand Theft Auto 3'' title been initially available on both PlayStation and Xbox, the market share gaps may have been much smaller, Credit Suisse's Maynard said.
Sony's Challenge
Microsoft's early start this time may give it better exclusive games, helping it pare Sony's lead. Sony may fall to 45 percent or 50 percent of the market with the next game systems, from 57 percent now, Piper Jaffray's Gikas said.
The challenge to Sony, the world's second-largest consumer electronics maker, comes after the company posted its biggest loss in two years last quarter and in March installed Howard Stringer as chief executive officer. The stock has lost more than 66 percent of its value in the past five years.
Microsoft CEO Steve Ballmer is depending on Xbox to help revive sales growth, which is expected to drop to the slowest rate ever in the year ended June 30.
This time, Microsoft will also spend more time appealing to the Japanese market, the No. 2 video-game market and Sony's home turf. The first Xbox didn't have titles tailored to the local audience and the machine and controllers were too big to appeal to Japanese gamers.
`Battle-Hardened'
Since the release of Xbox, Microsoft has built a reputation for its graphics and technology. Xbox outsold PlayStation 2 in the U.S. holiday shopping season for the first time last year, helped by ``Halo 2.''
Microsoft will lure better games from top publishers this time, Microsoft's Moore said. The company will spread its best titles evenly over each year, slimmed down the console and contracted with three well-known Japanese game developers, including the creator of ``Final Fantasy,'' to produce Xbox games.
``We've been around the block now,'' Moore said. ``We're battle-hardened. It's a whole different ball game this time.''
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Looking good guys. Looking GOOD!